Nine(NINE) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2020 was $146.6 million, a decline from management's original guidance due to deteriorating market conditions, with adjusted EBITDA at $10.3 million [9][15] - The company reported a net loss of $300.9 million, with basic EPS at negative $10.22 per share, and an adjusted net loss of $14.9 million or negative $0.51 per share [15][34] - ROIC for the first quarter was negative 3% [16] Business Line Data and Key Metrics Changes - Revenue declines across all service lines ranged from approximately 7% to 20%, with Cementing seeing flat activity compared to Q4, while Coiled Tubing days worked decreased by approximately 13% [11][14] - Completion Tools revenue was $32.2 million, a decrease of approximately 10%, despite a 26% increase in total stages completed quarter-over-quarter [31] - Cementing revenue was $48.6 million, down approximately 7% quarter-over-quarter, with 1,044 jobs completed, a 2% increase from Q4 [28] Market Data and Key Metrics Changes - The energy industry faced significant global crude demand reductions of 25 million to 30 million barrels or more due to the COVID-19 pandemic, leading to crude prices dropping over 65% by the end of March [10] - U.S. active frac crews could decline to as low as 90 to 100, compared to over 300 during 2019 [41] Company Strategy and Development Direction - The company aims to focus on cash preservation and cost reductions, with a new CapEx guidance of $10 million to $15 million for 2020 [43] - The commercialization of new dissolvable and composite plug technology remains a top priority, with successful trials in the Permian Basin and Northeast region [16][17] - The company is positioned to gain market share during the downturn, as many competitors may exit the market [76] Management's Comments on Operating Environment and Future Outlook - The outlook for 2020 remains extremely challenging, with anticipated activity declines of more than 50% versus Q1 and pricing pressure expected to continue [39] - Management emphasizes the importance of flexibility in operations to adapt to market conditions, with a focus on maintaining liquidity [42][50] - Conversations with customers regarding future activity in gassy basins are ongoing, but plans remain fluid due to market volatility [86] Other Important Information - The company maintained a cash position of $90.1 million as of March 31, 2020, with total liquidity of $183.6 million [25] - Significant cost-cutting measures have been implemented, including a reduction in annual payroll by approximately $50 million [45] Q&A Session Summary Question: Sources of cash and working capital - Management indicated that working capital could still be a source of cash despite lower revenue, with a focus on monitoring receivables and inventory [56][59] Question: Business positioning beyond Q2 - Management acknowledged that Q2 would be challenging but expressed optimism that cash burn would improve in Q3 as costs are adjusted to match reduced activity [62][63] Question: Revenue expectations across business lines - Management noted that while revenue would decline, the impact would vary by service line, with Cementing potentially faring better than others [69][70] Question: Market share and competition - Management expressed confidence in gaining market share during the downturn, as many competitors may exit the market [76] Question: Liquidity and debt repurchase strategy - Management is cautious about maintaining liquidity before considering further debt repurchases, emphasizing the importance of cash preservation [99][100]